Bank of America analyst Sara Senatore advised clients that pizza delivery providers such as Yum Brands’ ( NYSE: YUM ) Pizza Hut, Domino’s ( NYSE: DPZ ) and Papa John’s ( NASDAQ: PZZA ) have not been broken by gig economy delivery leaders.
She explained that DoorDash ( DASH ) and Uber Technologies ( UBER ) have grown rapidly since 2018, elevating the bear case on pizza delivery as the delivery option pool grows. Yet, while Senatore noted that each chain was a delivery share donor in 2021, same store sales growth at each remains positive.
“This dynamic argues for widespread growth in delivery availability among smaller pizza restaurants growing the delivery pool rather than declining chain affinity,” she wrote. “It’s also consistent with the view articulated by Pizza Hut and Papa John’s that customers on aggregator platforms are different from and incremental to their existing customer bases.”
As post-COVID demand starts to normalize, there should be deceleration from 2021. However, she notes that trends remain above 2019 levels. Further, strength in carryout orders give more reason to remain optimistic about the industry leaders.
“Carryout has re-emerged as the primary driver of sales growth for Domino’s, consistent with the prevailing pre-COVID dynamic,” Senatore wrote on Monday. “Given that the carryout occasion primarily competes with traditional Quickservice occasions (carryout or drive through) the putative market for carryout pizza is far bigger -- and less penetrated -- than delivery, suggesting to us a long growth runway ahead.”
Read more on recent restaurant sales trends charted by Baird .
For further details see:
Carryout demand could carry pizza stocks higher in 2023